Ten major reforms Modi must pursue to transform India

Prime minister Narendra Modi and his party, the BJP, have won an overwhelming mandate to govern India for the next five years.

Campaigning on the theme of “sab ka saath, sab ka vikas,” Modi promised job creation, economic development and better standard of living for all Indians.

Upon assuming office, he has released a list of ten priorities, mostly platitudes, relating to governance and ethical conduct of ministers.

The new government must unleash a reform agenda that can catapult India on a permanent high growth trajectory.

Here are ten reforms to accomplish such a mission.

Financial sector reforms: Much has been written about banking, capital markets, PSU’s, pension and insurance reforms along with Foreign Direct Investment (FDI) over the last several years to boost economic growth.

Inclusive growth and job creation eluded the previous government due to its failure to reform financial sector.

While the new finance minister is making the right noises, these reforms must be enacted rapidly to boost investor confidence and attract long term capital inflows.

n Ease of doing business reform: India ranks a hideous 134th in the ease of doing business ranking and a dreadful 179th ranking in starting a business index of countries created by World Bank.

The inability of Centre, State and Municipal governments to frame clear rules and regulations is a major impediment to small and medium businesses which are engines of growth and job creation.

It takes months for construction permits, property registration and electricity connections while more than 20 clearances are obligatory at all levels of government.

India must emulate its South Asian counterparts like Malaysia and Thailand who have climbed to the top 25 in the last five years.

n Tax reforms: Tax terrorism on companies was often used in campaign speeches by Modi. But what was ignored was tax terrorism on individuals.

The dreaded Tax Deduction at Source (TDS) is a cause of harassment of many individual tax payers, professionals and salaried middle class. Either TDS should be completely abolished or a robust system to track payments must be established.

A sweetener like debt relief must be offered to States to introduce Goods and Services Tax (GST).

Debts of all state governments can be transferred to a “Bad Debt Bank” created by central government and retired at a later date in exchange for states agreeing to an unconditional introduction of GST.

n Administrative reforms: Modi has quite often talked about empowering civil servants to make honest and impartial decisions.

Based on the recommendations of Second Administrative Reforms Commission report, the Supreme Court had asked the previous government to set up a Civil Services Authority, enact Civil Services Act and have a fixed tenure for civil servants.

The new government must hasten the implementation of court’s diktat that can improve and enhance administrative efficiency.

n Government reforms: Many in the current Council of Ministers must be writing their own ministry’s obituary. Commodity centric ministries must be abolished along with the current on-going merging of like minded ministries.

Ministries that are state subjects like agriculture and education should also be scrapped or their role considerably reduced. 

n Agriculture sector reforms: Farming is strangled by government controls while cartels rule the roost in distribution. Infrastructure and knowledge deficit plagues farmers who are entirely dependent on act of god to deliver a perfect monsoon for survival.

Decontrolling commodity prices, replacing the APMC Act and a direct cash transfer scheme as an interim measure are a must for a thriving agriculture sector.

n Electoral reforms: Indian democracy is beset with two major problems – unaccounted money and criminalisation.

Political parties must open their books up for public scrutiny and subject themselves to the RTI Act. A fast track judicial process is a must to clear tainted politicians within six months of filing of charge sheet.

Most other issues like proper electoral rolls, restricting candidates to contesting from a single constituency, prosecuting candidates for electoral violations, filing of false affidavits etc can be resolved by empowering the Election Commission of India.

n Judicial reforms: An independent and impartial judiciary is the essence of any democracy. That our courts have a backlog of more than 40 lakh cases is a shame.

Not only people are denied justice but in many cases economic interests of individuals and businesses are not protected.

Criminals and fraudsters roam free while sanctity of contracts is abused with impunity thanks to a justice system that takes an eternity to deliver justice.

n Subsidies reforms: The prolific rise in non-merit subsidies over the last decade has been instrumental in straining the budget. Fuel, fertilizer and food subsidies have
distorted budgetary allocation and have constrained the government from making public investments in education, health and infrastructure.

Centre must also amend the Electricity Act of 2003 to end power subsidies by state governments.

Centre-state reforms: Modi quite often has stated that chief ministers must become partners with the central government to revive India’s growth.

And if the new government has to win over state leaders it must end whimsical transfers of funds, abolish Planning Commission and revamp National Development Council.

More discretion must be provided to state governments in implementation of the centrally sponsored schemes which has been bone of contention.

In the past, political will for reforms always came from an economic crisis.

But this time around, a historic mandate has bequeathed political capital to Modi and his team to embark on major reforms that can fulfill the hope and aspirations of a billion Indians.

He must seize this moment to transform India into a 21st century economic behemmoth that the world cannot ignore anymore. Nothing less can make Modi a transformational figure in world history.